Tax Holiday Update: Extended Registration, Global Minimum Tax Clause Regulated

The government has revised regulations regarding the provision of a 50% and 100% corporate Income Tax reduction (tax holiday) for investments in pioneer industries.

The updated regulations include an extension of the registration deadline, mechanism and registration requirements, and the inclusion of clauses related to implementing global minimum tax provisions.

The revisions were issued through Ministry of Finance Regulation (PMK) Number 69 of 2024, effective as of October 9, 2024. This regulation amends the previous provisions in PMK Number 130/PMK.010/2020.

Tax Holiday Application Deadline Extended

Under the new regulation, the government has extended the tax holiday application deadline from October 2024 to December 31, 2025. This provision is outlined in Article 21 of the regulation.

As a result, all tax holiday applications submitted through the Online Single Submission (OSS) system must be received by the Ministry of Finance by the end of 2025.

Read: Tax Holiday at IKN: Longer Duration, Lower Investment Value

Minimum Tax Rate Clause

As stated in the government’s rationale, this new regulation was issued to align the provision of tax holiday incentives with the global minimum tax policy.

As we know, the global minimum tax policy, initiated by the OECD and G-20 countries, mandates a minimum tax rate of 15% for every multinational company group.

Thus, if a multinational company receives tax incentives that result in an effective Income Tax rate below 15%, an additional tax equal to the difference can be imposed.

Therefore, the government has introduced a new provision for tax holidays under Article 15A of this regulation. Essentially, every multinational company group in Indonesia, whether currently receiving a tax holiday or planning to apply for one, will be subject to an additional tax.

Amount of Corporate Income Tax Reduction

The new regulation does not alter the amount of corporate Income Tax reduction provided, which remains at 50% and 100% of the payable tax, with a minimum duration of five years and a maximum of 20 years, for investments of at least IDR 100 billion.

 •  100% reduction of corporate income tax

This facility is given to companies that make investments with a minimum investment value of IDR 500 billion, with details:

No	Investment Value	Tax Holiday Duration
1	IDR 500 billion < IDR 1 trillion	5 years
2	IDR 1 billion < IDR 5 trillion	7 years
3	IDR 5 billion < IDR 15 trillion	10 years
4	IDR 15 billion < IDR 30 trillion	15 years
5	≥ IDR 30 trillion	20 years

•   50% Corporate Income Tax Reduction

A 50% corporate Income Tax reduction is granted to companies with an investment of at least IDR 100 billion and up to just under IDR 500 billion. This tax reduction is provided for a period of five tax years.

It is important to note that the tax reduction applies to income related to the company’s main business activities.

Types of Pioneer Industries

The types of pioneer industries that are eligible for this tax holiday facility include:

1. Upstream basic metals such as steel or non-steel metals
2. Oil and gas refining or processing
3. Basic organic chemicals derived from petroleum, natural gas, and/or coal
4. Basic organic chemicals derived from agricultural, plantation, or forestry products
5. Basic inorganic chemicals
6. Key raw materials for pharmaceuticals
7. Manufacture of irradiation, electromedical, or electrotherapy equipment
8. Manufacture of key components for electronics or telematics equipment
9. Manufacture of machinery and key machinery components
10. Manufacture of robotic components for machinery production in manufacturing
11. Manufacture of key components for power generation machinery
12. Manufacture of motor vehicles and key components
13. Manufacture of key components for ships
14. Manufacture of key components for railways
15. Manufacture of key components for aircraft and aerospace industry support
16. Processing of paper based on agricultural, plantation, or marine products, producing pulp
17. Economic infrastructure
18. Digital economy, including data processing, hosting, and related activities

The assessment of whether or not a taxpayer fulfills these criteria will be determined online by the OSS system. This system will automatically submit a notification whether it meets the criteria or not.

No Offline Application Option

Under the new regulation, the government has removed the option to apply for a tax holiday offline. Article 7, which previously allowed for offline applications, has been eliminated.

As a result, tax holiday applications can now only be submitted through the OSS system. Previously, the offline application option was available if the OSS system was not yet available. 

Thus, applications could be submitted directly to the Minister of Finance through the Head of the Investment Coordinating Board (BKPM). (ASP/CHY/KEN)